Avis 2006 Annual Report Download - page 27

Table of Contents
We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate now that the Cendant Separation is
complete, and we may experience increased costs as a result of the Cendant Separation.
Realogy, Wyndham Worldwide and Travelport are contractually obligated to provide to us only those services specified in the transition
services agreement and the other agreements we entered into with them in connection with the separation. We may be unable to replace, in a
timely manner or on comparable terms, the services that Realogy, Wyndham Worldwide or Travelport previously provided to us that are not
specified in the transition services agreement or the other agreements. In addition, if Realogy, Wyndham Worldwide or Travelport do not
continue to perform effectively the transition services and other services that are called for under the transition services agreement and the other
agreements, we may not be able to operate our business effectively and our profitability may decline. Furthermore, after the expiration of the
transition services and other agreements, we may be unable to replace, in a timely manner or on comparable terms, the services specified in
such agreements.
Our agreements with Realogy, Wyndham Worldwide and Travelport may not reflect terms that would have resulted from arm’s-length
negotiations among unaffiliated parties.
The agreements related to the separation, including the Separation and Distribution Agreement, Tax Sharing Agreement, Transition Services
Agreement and other agreements, were not the result of arm’s-length negotiations and thus may
not reflect terms that would have resulted from
arm’s-length negotiations among unaffiliated parties. Such terms include, among other things, those related to allocation of assets, liabilities,
rights, indemnifications and other obligations among the companies.
We are relying on Realogy, Wyndham Worldwide and Travelport to fulfill their obligations under the Separation and Distribution
Agreement and other agreements.
Pursuant to the Separation and Distribution Agreement, Realogy and Wyndham Worldwide are responsible for 62.5% and 37.5%, respectively
of certain contingent and other of our corporate liabilities including those relating to unresolved tax and legal matters. More specifically,
Realogy and Wyndham Worldwide have generally assumed and are responsible for the payment of their allocated percentage of (i) all taxes
imposed on us and certain of our subsidiaries and (ii) certain of our contingent and other corporate liabilities and/or our subsidiaries to the
extent incurred prior to August 23, 2006. These contingent and other corporate liabilities include liabilities relating to (i) Cendant’s terminated
or divested businesses, including among others, the former PHH and Marketing Services (Affinion) businesses, (ii) liabilities relating to the
Travelport sale, if any, (iii) the Securities Action and related litigation (for a further description of these litigation matters, see “Legal
Proceedings”) and (iv) generally any actions with respect to the Cendant Separation or the distributions brought by any third party. If any party
responsible for such liabilities were to default in its payment, when due, of any such assumed obligations, each non-defaulting party, including
us, would be required to pay an equal portion of the amounts in default.
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• With the completion of the Cendant Separation, the cost of capital for our business may be higher than our cost of capital prior to the
completion of the Cendant Separation.
• While we have entered into short-term transition agreements that govern certain commercial and other relationships among us,
Realogy, Wyndham Worldwide and Travelport, those temporary arrangements may not capture the benefits (including economies of
scope and scale in customer and vendor relationships) our business has enjoyed as a result of being integrated with those companies.
The loss of these benefits could have an adverse effect on our business, results of operations and financial condition.
•
Other significant changes may occur in our cost structure, management, financing and business operations as a result of our operating
as a company separate from Realogy, Wyndham Worldwide and Travelport.